DUBAI
(Reuters) - Al Qaeda's leader in Iraq beheaded an American civilian and
vowed more killings in revenge for the "Satanic degradation" of
Iraqi prisoners, an Islamist Web site said on Tuesday.

A poor quality videotape on the site showed a man
dressed in orange overalls sitting bound on a white plastic chair in a bare
room, then knelt on the floor with five masked men behind him.

"My name is Nick Berg, my father's name is Michael...
I have a brother and sister, David and Sarah," said the bound man,
adding he was from Philadelphia.

One of the masked men read a statement urging Muslims
to seek revenge after pictures were published of Iraqi prisoners being abused
by U.S. troops at Abu Ghraib prison near Baghdad.

"Nation of Islam, is there any excuse left to
sit idly by? And how can free Muslims sleep soundly as they see Islam being
slaughtered, honor bleeding, photographs of shame and reports of Satanic
degradation of the people of Islam, men and women, in Abu Ghraib prison?"
the statement said.

The masked men then pushed the 26-year-old American
to the floor and shouted "God is greatest" above his screams as
one of them sawed his head off with a large knife then held it aloft for
the camera.

The Web site said Abu Musab al-Zarqawi, a top ally
of al Qaeda leader Osama bin Laden, was the man who cut off Berg's head.
The statement in the video was signed off with Zarqawi's name and dated
May 11.

Jordanian-born Zarqawi, 37, has raised his profile
and status as al Qaeda's most active operational leader with a series of
suicide bombs and attacks on U.S. troops in Iraq.

A body found in Baghdad over the weekend was identified
on Monday as Berg before the videotape was released.

"Berg's body was found with his hands behind
his back and beheaded," said another U.S. official who declined to
be identified. "The body was found along a roadside by a U.S. military
patrol."

"This shows the true nature of the enemies of
freedom," White House spokesman Scott McClellan told reporters. "They
have no regard for the lives of innocent men, women and children. We will
pursue those responsible and bring them to justice."

MILITANT STATEMENT
Photographs shown around the world of naked Iraqi prisoners stacked in a
pyramid or positioned to simulate sex acts at Abu Ghraib prison have provoked
international anger and pose a serious setback to U.S. efforts to stabilize
Iraq.

President Bush and British Prime Minister Tony Blair
have both apologized and pledged to punish those responsible but both governments
have come under pressure for senior ministers to take the blame for the
abuse.

The militants' statement, addressing families of U.S.
soldiers, said Zarqawi's group had offered Washington to swap Berg for Iraqi
prisoners held by U.S. troops "but they refused."

"You will only get shroud after shroud and coffin
after coffin slaughtered in this manner," it said.

"As for you Bush, dog of the Christians, anticipate
what will harm you... You and your soldiers will regret the day you stepped
foot in Iraq and dared to violate Muslims."

The murder was condemned by the Council of American-Islamic
Relations, a U.S.-based Islamic civil rights and advocacy group.

"We condemn this cold-blooded murder and repudiate
all those who commit such acts of mindless violence in the name of religion,"
it said.

It was not immediately possible to verify the authenticity
of the tape carried on the Muntada al-Ansar Islamist Web site, but the CIA
was reviewing the video for clues of who was responsible, a U.S. official
said.

"He was a private American citizen not associated
with a military contract," said a State Department official.

Berg had been missing for several weeks. He was last
heard from on April 9 when he telephoned his parents. He said he was trying
to find a safe way home after trying to find work as an independent communications
contractor.

"The Berg family is devastated by this loss.
They want to extend their sympathy to other families who have also suffered,"
said Bruce Hauser, their neighbor in the Philadelphia suburb of West Chester.

The ritual killing resembled the murder of U.S. reporter
Daniel Pearl, beheaded by Islamist militants in Pakistan. Berg's orange
overalls were reminiscent of those worn by al Qaeda suspects held by U.S.
troops at Guantanamo Bay in Cuba.